Business Valuations

It depends on who’s asking – and why. At Starwood Business Group, we evaluate your business from a buyer’s perspective. We’ll make a diligent effort to understand both you and your business. We’ll help you establish realistic expectations – the foundation of which is always cash flow.

Cash flow is king, and buyers will most commonly view your business in terms of a pre-tax multiple. Starwood Business Group will evaluate your financial statements against a database of comparable businesses in your industry. The result is a market-based, realistic multiple of earnings… the very process a prospective buyer would employ. To calculate an accurate valuation, your SBG business broker may ask for any of the following:

• three years of income statements & balance sheets (& YTD)
• three years of corporate tax returns
• a fair market value of FF&E
• a value of existing inventory at cost
• a list of trade names, patents, or intellectual property of value
• a list of other intangible assets of value (contracts, domains, etc.)

When you work with an SBG broker to value your business, the goal is a simple one, the creation of an accurate and comprehensive report that will stand up to scrutiny. You will receive a professional business valuation that becomes the best tool to obtain maximum selling price. Without a professional valuation, a business owner must be prepared to defend their opinion of value. 

SBG's depth of experience coupled with a vast knowledge of valuation and our in-house proprietary valuation model will result in an expert opinion of value, delivered in a responsive, timely and efficient manner. Starwood Business Group has valued and sold virtually every type of business, and the majority of businesses sold for an average of 95% of the asking price.  

Small and mid-sized business valuations typically depend on four key value factors:

• Seller's Discretionary Cash Flow (SDC)
• Risk
• Terms of the Sale
• Industry

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Seller's Discretionary Cash Flow

The main factor of determining value for small and mid-sized businesses is the total cash flow benefiting the owner - also known as Seller's Discretionary Cash Flow (SDC). SDC is calculated using the following six categories:

1.  Profit or loss as reported
2.  Owner's salary
3.  Discretionary expenses
4.  Non-recurring expenses
5.  Non-cash expenses such as interest, amortization and depreciation.
6.  Expenses not included in the P&L.  These expenses must be provable and justifiable.

Once these categories are added together and an SDC is calculated, a multiplier is applied. The multiplier can range from 1 to 5 (or more), depending on many factors.  

Risk
The second valuation factor is the level of risk. Factors in this category include:

• Years in business and with the current owner
• Profit trend
• Quality of books and records
• Franchise membership
• Brand recognition/ strength
• Level of competition
• Dependence on current owner
• Diversification of customer base
• Lease length and terms
• Asset value
   

Terms of the Sale
This is the one source of value that the business seller can almost completely control. Components of the terms include:

• Down payment
• Interest rate
• Monthly payment
• Non-compete agreement
• Seller training of buyer
  

The majority of business sales in the Atlanta market require the seller to provide some level of financing to the buyer of the business. With seller financing, the seller receives part of the purchase price at the time of the sale ("the down payment") and the remainder over several years, plus interest. The buyer uses the cash flow from the business to pay off the debt. Structuring a sale with attractive terms can significantly increase the value of your business and help to sell it faster.

Industry 

Certain businesses are valued at five (or more) times the seller's discretionary cash flow while other businesses only bring 1 time. An important reason in determining the multiple of SDC is the industry of the business. Certain industries are more desirable than others. Factors influencing desirability include:

• The fun & ease of operating the business
• Location
• Facilities
• Employee relations
• Operating hours
• Growth potential

Maximize the value of your business 
You don't want to leave money on the table and you don't want to price it too high and scare off the qualified buyers. SBG has the nation's best and largest database of comparable sales to help you establish a fair price. For larger businesses SBG Mergers & Acquisitions will handle the deal from the first meeting to the closing table. 

Our business is selling businesses. We know most business owners do not want anyone but real buyers to know that their business is for sale. The professional business brokers at SBG know business brokerage and help you maintain this critical element of confidentiality. Since 2005, we have been helping businesses owners sell and buy businesses in Atlanta, the southeast and North America.

Valuing Your Atlanta Business 
To estimate the value of your business, we will consider all these factors, the selling prices of comparable businesses in Atlanta, Georgia and the US, as well as any other factors unique to your particular business that may make it more valuable. SBG offers a free confidential business consultation to discuss the sale of your business in Atlanta. Our professional team of business brokers have been serving business owners in Atlanta and the state of Georgia since 2005.